Scotland's Top Earners' Wages Growing Faster than the Rest

Will Scotland be able to tackle inequality better if it is independent? (Reuters)

Scotland's top 1% of income earners increased their total income at a greater rate than the rest of the nation's workers over the past decade.

A report funded by the Economic and Social Research Council (ESRC) found that those in the top 1% income bracket in Scotland could expect to earn 20 times more than someone in the bottom 1%.

The findings of the report could have implications for the debate on Scottish independence as the incumbent Scottish National Party (SNP) has argued that independence could give it powers that would help it tackle economic inequalities.

The report, conducted by academics David Eiser and David Bell at the University of Stirling, said that the issue of economic inequality and whether it could be tackled through independence needed study.

"Inequality is clearly an issue in the Scottish referendum debate and our motive in writing this report is to help provide evidence," said Bell.

Key Points

According to study, by international standards the inequality of gross earned income (measured before the effects of taxes and benefits) in Scotland was relatively high and was much higher than in the Nordic countries.

Inequality at the extreme ends of income scale has increased in the last decade. The incomes of the top 1-2% of earners have increased compared to the average while those in the bottom 5-10% fell further behind the average.

Much of the increase in inequality has been driven by increased variability in working time according to the study.

This was found to be particularly the case in lower-paying occupations, where there has been a significant increase in part-time working.

According to the the Business in Scotland 2013 survey, data shows that 73% of new businesses created in the year to March 2013 were unregistered and were so small that they would not be liable for VAT.

The survey defines an unregistered business as a company that has no employees and consists of a sole proprietor / partnership which is comprised of only owner-managers or companies with one employee director.

In other words these small businesses are really self-employed people that have an annual turnover below the VAT threshold of £77,000 (€89,810, $123,677) and do not employ anyone else.

These companies accounted for a bulk of the rise in the total number of unregistered enterprises between 2012 and 2013.

The Scottish labour market became increasingly polarised between 2001 and 2010.

This means that while the share of higher paying and lower paying jobs increased, the share of middle-wage jobs fell, contributing to inequality growth.

There has been virtually no increase in net income inequality in Scotland (after taxes and benefits are taken into account) since 1997.

However, increased government transfers, particularly to families with children and the elderly, have offset the small increases in earned income inequality that occurred.

The study concluded that countering inequality due to globalisation for an independent Scottish government would be difficult.

"Though an independent Scotland would have more powers to address inequality, its room for manoeuvre would be constrained by these wider forces", explained Bell.

"Inequality in Scotland, like in many developed nations, is partly being driven by technology, by trade, and even by how we decide to form households. So, there are likely to be limits to the extent that a small open economy can reduce inequality. Scottish independence would provide opportunities, but the constraints that already exist would not go away," he said.